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Old Dominion (ODFL) to Post Q3 Earnings: Is a Beat in Store?

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Old Dominion Freight Line, Inc. (ODFL - Free Report) is slated to report third-quarter 2018 results on Oct 25, before market opens.

In the second quarter, the company delivered better-than-expected earnings and revenues. Moreover, the bottom line improved significantly year over year on the back of higher revenues. Also, the top line improved on a year-over-year basis.

Old Dominion has an impressive surprise history, beating estimates in each of the trailing four quarters with an average beat of 5.1%.

Factors at Play

Old Dominion is expected to perform well in the third quarter on the back of strong performance in the less-than-truckload (LTL) segment, which generates major share of revenues. The Zacks Consensus Estimate for third-quarter revenue per hundredweight reflects 9% year-over-year increase.

Demand for the company’s services is strong and service center network capacity is anticipated to suffice business growth at least in the near term. The company aims to boost investors’ confidence through steady reinvestments in its business, which will support long-term interests.

Notably, shares of the company have outperformed the industry in the July-September period, primarily owing to strength in the LTL unit. The stock has gained 8.2% compared with the industry’s rise of 1.9%.

The new tax reform policy (Tax Cuts and Jobs Act) is a boon for U.S.-based transportation companies like Old Dominion. The significant cut in corporate tax rate will boost cash flow, which will drive the bottom line in the third quarter. Moreover, the provision allowing capital expenditures to be deducted from tax in the year they are incurred is favorable for stocks like Old Dominion. This is because such companies make significant capital expenditures.

However, higher operating expenses and escalating fuel costs are likely to limit bottom-line growth. This is because expenses on fuel represent a significant chunk of any transportation company’s operating expenses and Old Dominion is no exception.

Additionally, increased capital expenditures may put pressure on the bottom line in the soon-to-be-reported quarter.

 

What Does the Model Say?

Our proven model shows that Old Dominion is likely to beat estimates in the to-be-reported quarter, as it has the perfect combination of the following key ingredients:

Earnings ESP: Old Dominion has an Earnings ESP of +0.69%. The Most Accurate Estimate is at $1.98 per share, higher than the Zacks Consensus Estimate of $1.97. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Old Dominion carries a Zacks Rank #2 (Buy). Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have higher chances of beating estimates.

Conversely, we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Investors interested in the broader Transportation Sector may check out other companies with the right combination of elements to beat estimates in the next releases:

Genesee & Wyoming Inc. has an Earnings ESP of +0.37% and a Zacks Rank #1. The company will release third-quarter 2018 results on Oct 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Union Pacific Corporation (UNP - Free Report) has an Earnings ESP of +0.57% and a Zacks Rank #2. The company will release third-quarter 2018 results on Oct 25.

Southwest Airlines Co. (LUV - Free Report) has an Earnings ESP of +1.61% and a Zacks Rank #3.  The company will release third-quarter 2018 results on Oct 25.

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Old Dominion Freight Line, Inc. (ODFL) - free report >>

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